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Aggressive Indian Outward M&A runs into Political Headwinds – Need for better Geopolitical Risk Management

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Mergers & Acquisitions in India

Indian companies have been expanding aggressively by taking over companies and assets abroad. A number of big bang acquisitions have been made such as taking over of Jaguar by the Tatas and Novelis by the Birla Group. A large number of coal companies and mines had been bought by a number of major Indian industrial groups to fuel their thermal power plants at home.

Though India too faces some environmental opposition, massive ultra mega power plants with capacity of 4000 MW are getting built by new Indian private utilities.

With domestic coal production rising at a snail’s pace, these companies are racing to secure coal supplies at whatever price they can get. Steel companies too are hungry for coal as it forms a major component of their product. Lanco Solar, Adani Power, Reliance Power, Tata Power, Tata Steel, Coal India have all bought or are in the process of buying coal mines and coal companies in foreign countries.

However a number of these projects have run into teething problems. While some of these problems are due to bad economic decision making, many are due to plain bad due diligence of geopolitical risks.

The latest Indian company to have squandered millions of dollars is the Jindal Group which was building a huge steel plant in Bolivia taking advantage of a big iron ore asset there. After 4-5 years in which the company failed to build the plant due to gas supply issues with the local government, the company has pulled the plug. The relations between the Jindal Group and the Bolivian Government has deteriorated to such an extent that the company is complaining of its employees getting harassed and jailed.

Risk Management in India

Note the Indian Government is notoriously bad at protecting the interest of its companies and citizens unless they are VVIPs. Note the Jindal Group which had been growing exponentially during the boom period till 2008 has started facing problems both at home and abroad. The company which started out as a steel pipe manufacturer had spread its wind to the whole steel industry. The stoppage of illegal iron ore mining by the Supreme Court has starved its domestic steel plants of the essential raw materials leading to large losses. While the going was good it was investing money like water everywhere including a $8 billion coal to liquid plant. But now it is failing to build a normal run of the mill steel plant.

Indian companies badly need better overall risk management as they commit billions of dollars in investing in foreign assets. Don’t think much thought is going into evaluation of risks much less geopolitical risks.


In a statement, the company said the government action, taken Friday, “shows that the Bolivian government is taking recourse to criminal proceedings and its intent is to victimize the company and its employees.” It called on the Bolivian government to “ensure the safety and security of all our employees and assets that legally belong to us.”

Bolivian officials couldn’t immediately be reached to comment.

Jindal said it has written to India’s foreign minister, S.M. Krishna, about the matter but has yet to receive a response. A spokesman for the Ministry of External Affairs said in a statement: “This is a complex commercial dispute. Our Embassy and Ambassador in Peru (which also covers Bolivia) is assisting in the matter and has been directed to follow up with Bolivian government on the latest issues.”

A Jindal spokesman said two female managers were arrested at its office Friday in Puerto Suarez, where the project is located, and were accused of removing property. They were taken to a police station where they were questioned then later released. The spokesman said the allegations by the Bolivian authorities were “frivolous” and that the intent of the action had been to intimidate the employees.


Sneha Shah

I am Sneha, the Editor-in-chief for the Blog. We would be glad to receive suggestions, inputs & comments on GWI from you guys to keep it going! You can contact me for consultancy/trade inquires by writing an email to

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